Marchman v. NCNB Texas Nat. Bank

• Decision Date: 05 June 1995
• Docket Number: No. 21415,21415
• Citation: 120 N.M. 74,1995 NMSC 41,898 P.2d 709
• Court: New Mexico Supreme Court
• Parties: Herb MARCHMAN, Marchman Enterprises, Inc., Estate of John Burroughs, and American Nut Company, Inc., Plaintiffs-Appellees, and Cross-Appellants, v. NCNB TEXAS NATIONAL BANK, Defendant-Appellant, and Cross-Appellee.

Page 709

898 P.2d 709

120 N.M. 74

Herb MARCHMAN, Marchman Enterprises, Inc., Estate of John Burroughs, and American Nut Company, Inc. Plaintiffs-Appellees, and Cross-Appellants, v. NCNB TEXAS NATIONAL BANK, Defendant-Appellant, and Cross-Appellee.

No. 21415.

Supreme Court of New Mexico.

June 5, 1995.

[120 N.M. 78] Madison, Harbour, Mroz & Puglisi, P.A., William C. Madison, M. Eliza Stewart, Gregory D. Steinman, Albuquerque, for appellant.

Felker, Ish, Hatcher, Ritchie, Sullivan & Geer, P.A., Carol J. Ritchie, Santa Fe, for appellees.

OPINION

FRANCHINI, Justice.

The lawsuit underlying this appeal and cross-appeal was filed in the First Judicial District by a Texas corporation; a New Mexico corporation owning all the stock of the Texas corporation; and two shareholders of the New Mexico corporation, one of whom was the president of both corporations. The complaint alleged that a Texas bank had acquired a promissory note executed by the Texas corporation, and, after assuring the corporation that it would work out a mutually agreeable long-term amortization of the debt, the bank wrongfully attached the Texas corporation's accounts receivable in satisfaction of the obligation.

The trial court granted partial summary judgment in favor of the bank against the New Mexico corporation and its shareholders for lack of standing because the claims of these plaintiffs were derivative of the claims of the Texas corporation. After granting judgment against these three plaintiffs, the court dismissed the claims of the only remaining plaintiff--the Texas corporation--for forum non conveniens. The bank moved for attorney's fees and costs, which were denied. The court also sanctioned the plaintiffs for intimidating witnesses from appearing at scheduled depositions. Plaintiffs appeal the partial summary judgment, the dismissal for forum non conveniens, and the award of sanctions. Defendant appeals the denial of attorney's fees and costs.

This case presents the Court with an opportunity to discuss in some detail corporate shareholders' and employees' standing to bring claims in their individual capacity when the corporation has allegedly suffered an injury; the doctrine of forum non conveniens; sanctions under SCRA 1986, 1-037(B) (Repl.Pamp.1992); awards of attorney's fees under the Unfair Practices Act, NMSA 1978, §§ 57-12-1 to -22 (Repl.Pamp.1987 & Cum.Supp.1994); and awards of costs under SCRA 1986, 1-054(E) (Repl.Pamp.1992). In doing so, we vacate the partial summary judgment in favor of NCNB on its claims of breach of the covenant of good faith and fair dealing and intentional and negligent infliction of emotional distress; we affirm the trial court on all other rulings.

I. FACTS

The Plaintiff-Appellant-Crossappellees in this case are: American Nut Corporation (ANC), a Texas corporation primarily engaged in the production of peanut butter; Marchman Enterprises, Inc. (MEI), a New Mexico corporation owning 100% of the shares in ANC; Herbert Marchman (Marchman), president of ANC and MEI and principal shareholder in MEI; and the Estate of John Burroughs (Estate), a shareholder in MEI. ANC enjoyed a banking relationship with First RepublicBank Dallas, N.A., until the bank's failure and resulting takeover by the FDIC in 1988. ANC executed a promissory note dated March 31, 1988, payable to First RepublicBank in the amount of $426,000, which was acquired by the FDIC.

Defendant-Appellee-Crossappellant Nationsbank of Texas, N.A., f/k/a NCNB Texas National Bank (NCNB), is a federally chartered bank with its principal place of business in Dallas, Texas. NCNB became the liquidating bank of First RepublicBank in July 1988. On July 31, 1988, ANC renewed the First RepublicBank promissory note with a maturity date of August 31, 1988, payable to NCNB in the amount of $426,000.

Upon maturity of the note in August 1988, NCNB suspended billing for monthly interest and began negotiations with ANC for restructuring the debt. During the negotiations ANC pursued refinancing options with other lenders, but was unable to find financing from a source other than NCNB. In February 1989 ANC renewed the note payable to NCNB with a maturity date of May 1, 1989. Before approving the renewal of the note, NCNB required that the payments due on the note increase to $10,000 per month, and that Marchman and MEI execute certain documents. In his personal capacity, Marchman executed a confirmation of a guaranty agreement dated March 31, 1988, and a subordination agreement; in his capacity as president of ANC, he executed a confirmation, modification, renewal, and extension of a security agreement dated March 31, 1988; and in his capacity as president of MEI, he executed a guaranty agreement and a subordination agreement.

When the note matured in May 1989 it was not declared in default, nor was demand made for principal or interest payments until November 1989. At this point NCNB offered ANC three alternatives: (1) cash collateralization of the remaining debt; (2) six-month renewal of the note with $30,000 monthly principal payments; or (3) legal recourse. ANC elected to execute a renewal note in the amount of $413,040.82 on April 23, 1990, which required five principal payments of $30,000 per month, plus interest, and a final payment of $263,040.82 on October 1, 1990. Marchman, acting in his various capacities, also reaffirmed the security agreement, guarantees, and subordination agreements as a condition for the renewal of the note.

ANC made the first four payments on the note, but failed to make the payment of $30,000 due September 1, 1990, or the final payment due October 1. Marchman had at least one discussion with Eugene Poppe, a loan officer for NCNB, during October 1990. Marchman proposed another workout arrangement for the debt, in which ANC would make principal and interest payments of $15,000 per month, but was told that Poppe was under pressure from his superiors to reach a solution on the note and was unwilling to discuss refinancing until the September 1 installment of $30,000 had been paid. This payment was not made and the parties failed to reach a mutually satisfactory workout of the debt. On November 23, 1990, NCNB sent a certified letter to ANC at its main office in Lewisville, Texas, stating that the note had matured on October 1, 1990, and that the principal balance of the note was $293,040.82 with accrued interest of $10,908.93. NCNB warned in the letter that if the entire principal and accrued interest were not paid in full by December 11, 1990, the bank would pursue the full legal remedies available to it under the note and documents executed in connection with the note.

Marchman apparently was out of the country when the letter arrived at ANC. On December 19, 1990, Poppe called ANC to inquire about ANC's response to the demand letter. He was told by John Marchman, ANC's vice president, that Marchman had not seen the letter and that ANC would need more time to respond to it. John Marchman called Poppe back later that day, but Poppe was not in at that time and never returned the call.

No further communication took place between the parties before NCNB took unilateral action in satisfaction of the obligation. On December 24 and 26, 1990, and January 30, 1991, NCNB sent letters to ANC's customers demanding that all sums due ANC be paid directly to NCNB, pursuant to NCNB's lien against ANC's accounts receivable granted in the security agreement executed March 31, 1988, and renewed February 15, 1989, and April 23, 1990. ANC's cash flow was adversely affected by this action, and on May 10, 1991, it filed a Chapter 11 bankruptcy petition.

On March 11, 1991, ANC, Marchman, MEI, and the Estate (collectively, "Plaintiffs") filed suit against NCNB in the First Judicial District for the State of New Mexico, located in Santa Fe. The complaint alleged breach of covenant of good faith and fair dealing, negligence, intentional misrepresentation or fraud, prima facie tort, and tortious interference with business relationships. On May 15, 1991, NCNB moved for summary judgment on the claims of Marchman, MEI, and the Estate for lack of standing, and moved to dismiss on the ground that the court lacked personal jurisdiction over it as an out-of-state defendant. On June 18, 1990, Plaintiffs amended their complaint to also allege intentional and negligent infliction of emotional distress and violation of the Unfair Practices Act. In its answer to the amended complaint, NCNB admitted the trial court had personal jurisdiction over the parties. On September 3, 1991, the court ruled that Marchman, MEI, and the Estate had standing to pursue claims for damages suffered separate and distinct from those sustained by ANC.

In March 1992 the case was removed to the United States District Court for the District of New Mexico. It appeared that ANC had no standing to bring a lawsuit in New Mexico because it had not obtained a certificate of authority to do business in the state pursuant to NMSA 1978, § 53-17-20(A) (Repl.Pamp.1983) (requiring foreign corporations to obtain certificate of authority before maintaining legal action). On July 30, 1992, the federal court decided that ANC did have standing based on a certificate of authority acquired subsequent to the filing of its complaint, and remanded the case back to the First Judicial District Court.

NCNB moved for summary judgment on Plaintiffs' claims in March and August 1992, and the trial court granted partial summary judgment on September 18, 1992, on the claims of breach of covenant of good faith and fair dealing and intentional and negligent infliction of emotional distress. On October 19, 1992, NCNB renewed its motion for summary judgment on the claims of Marchman, MEI, and the Estate for lack of standing, and on October 26, 1992, moved to dismiss ANC's claims for lack of subject matter jurisdiction or pursuant to the doctrine of forum non conveniens. Both motions were granted on May 28, 1993. On...